Venture Capital Fund Performance and the IPO Market

In this paper, the investment performance of a large database of venture funds is considered over a 28 year period. The results suggest that a portfolio of venture capital partnerships can provide an average return that is superior to the public equity market, although the individual fund returns are highly positively skewed. Absent these outliers, the level of fund performance is more in line with public equity market returns. This paper also establishes a link between public equity market conditions and venture capital returns. Finally, some preliminary evidence is provided of venture fund performance during and immediately following the dot.com bubble